Reinstate tax benefit for financial advice, planning groups urge Congress

A coalition of financial planning trade groups is urging Congress to reinstate tax incentives for professional financial advice, which were eliminated by the 2017 Tax Cuts and Jobs Act.

The appeal from the CFP Board, Financial Planning Association, National Association of Personal Financial Advisors, Financial Services Institute, and Investment Adviser Association comes as lawmakers consider the potential extension of several provisions of the TCJA that are set to expire.

In a joint letter dated September 16, the industry collective called on the House Committee on Ways and Means to restore and expand tax deductions that would make financial advice more accessible to everyday Americans.

"Congress recognized the value of professional investment and financial planning advice by providing a tax deduction for those services," the letter said, noting that the passage of the TCJA in 2017 resulted in the repeal of that limited deduction.

Ever since the tax perk was axed, the groups argued it has been more difficult for middle-income families to afford guidance in managing their finances, especially in times of economic volatility.

"Too many American households and workers lack access to competent and ethical financial advice as they plan for their retirement, college plans, home buying, and other financial goals," the letter stated.

While the loss of the tax deduction might not have felt that painful in the context of 2017's go-go stock market, the economic gut punch from the COVID-19 pandemic underscored the importance of accessible, professional financial advice for Main Street investors, the groups argued.

"Throughout the market fluctuations, millions of Americans, including many near retirement, watched the money they worked so hard to earn and to save for a secure retirement evaporate virtually overnight," they said.

The groups are asking Congress to consider a range of tax incentives, including deductions or credits, to encourage everyday investors to seek professional financial advice.

"All taxpayers need help to obtain the critical financial advice they need now, and any tax incentives should be widely-available to American households," they said.